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News Release

J. Crew Group, Inc. Announces Third Quarter Fiscal 2008 Results

Third Quarter Revenues Rise 9% to $363.1 million

Third Quarter Diluted EPS of $0.30

Revises Guidance for Fiscal 2008

NEW YORK, Nov. 25 /PRNewswire-FirstCall/ -- J. Crew Group, Inc. (NYSE: JCG) today announced financial results for the three months (third quarter) and nine months (first nine months) ended November 1, 2008.

Third Quarter highlights:

  • Revenues increased 9% to $363.1 million. Store sales (Retail and Factory) increased 7% to $250.9 million, with comparable store sales decreasing 3%. Comparable store sales increased 5% in the third quarter of fiscal 2007. Direct sales (Internet and Phone) rose by 13% to $101.8 million. Direct sales increased 36% in the third quarter of fiscal 2007.
  • Gross margin decreased to 41.6% of revenues from 45.6% of revenues in the third quarter of fiscal 2007.
  • Operating income decreased 32% to $32.5 million, or 9.0% of revenues, compared to $47.7 million, or 14.3% of revenues, in the third quarter of fiscal 2007. Operating income in the third quarter of fiscal 2008 includes approximately $6 million of costs related to our Direct channel systems upgrades.
  • Net income was $19.0 million, or $0.30 per diluted share, compared to a net income of $26.8 million, or $0.42 per diluted share, in the third quarter of fiscal 2007.

Millard Drexler, J. Crew's Chairman and CEO stated: "Despite these difficult economic times our priorities remain the same - providing innovative product, style and design, servicing our customers and making disciplined investments. At the same time, we recognize that a sea-change has occurred with the consumer. In the near term we are not immune to the significant challenges we are all facing in retail in these unprecedented times. However, our powerful brands, unique product offerings, compelling value proposition and multi-channel operating platform position us well for the long-term."

First Nine Months highlights:

  • Revenues increased 11% to $1,039.9 million. Store sales (Retail and Factory) increased 10% to $722.3 million, with comparable store sales decreasing 0.4%. Comparable store sales increased 6% in the first nine months of fiscal 2007. Direct sales (Internet and Phone) rose by 14% to $285.9 million. Direct sales increased 29% in the first nine months of fiscal 2007.
  • Gross margin decreased to 43.1% of revenues from 45.3% of revenues in the first nine months of fiscal 2007.
  • Operating income decreased 9% to $117.1 million, or 11.3% of revenues, compared to $129.2 million, or 13.8% of revenues, in the first nine months of fiscal 2007.
  • Net income was $67.7 million, or $1.06 per diluted share, compared to a net income of $72.1 million, or $1.13 per diluted share, in the first nine months of fiscal 2007.

Balance Sheet highlights as of November 1, 2008:

  • Cash and cash equivalents were $114.4 million at the end of the third quarter and include the impact of income taxes paid of $52.8 million and voluntary principal payments of debt of $25.0 million during the last 12 months.
  • Inventories at the end of the quarter were $250.1 million, reflecting the impact of 35 net stores opened since the third quarter of fiscal 2007 and 30 net stores opened since the end of fiscal 2007.

Guidance

Based upon the macro economic environment and its continuing impact on the trend of our business, we are revising our guidance for fiscal 2008. For fiscal 2008, the Company currently expects diluted earnings per share in the range of $1.11 to $1.16 as compared to its previous range of $1.44 to $1.54 and fiscal 2007 diluted earnings per share of $1.52. The Company's revised expectations for the balance of fiscal 2008 include comparable store sales declining high single digits, Direct sales growth in the range of flat to mid single-digits and net square footage expansion of approximately 10%.

Conference Call Information

A conference call to discuss third quarter results is scheduled for today, November 25, 2008, at 4:30 PM Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-0784 approximately ten minutes prior to the start of the call. The conference call will also be webcast live at www.jcrew.com. A replay of this call will be available until December 2, 2008 and can be accessed by dialing (877) 660-6853 and entering account number 3055 and conference ID number 304166.

About J. Crew Group, Inc.

J. Crew Group, Inc. is a nationally recognized multi-channel retailer of women's and men's apparel, shoes and accessories. As of November 25, 2008, the Company operates 226 retail stores (including 5 crewcuts and 10 Madewell stores), the J. Crew catalog business, jcrew.com, and 74 factory outlet stores. Additionally, certain product, press release and SEC filing information concerning the Company are available at the Company's website www.jcrew.com.

ForwardLooking Statements:

Certain statements herein are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and actual results of operations may differ materially from historical results or current expectations. Any such forward-looking statements are subject to various risks and uncertainties, including the strength of the economy, changes in the overall level of consumer spending or preferences in apparel, our ability to compete with other retailers, the performance of the Company's products within the prevailing retail environment, our strategy and expansion plans, systems upgrades, reliance on key personnel, trade restrictions, political or financial instability in countries where the Company's goods are manufactured, postal rate increases, paper and printing costs, availability of suitable store locations at appropriate terms and other factors which are set forth in the Company's Form 10-K and in all filings with the SEC made by the Company subsequent to the filing of the Form 10-K. The Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.




                                                                Exhibit (1)

J. Crew Group, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(Amounts in thousands,

except percentages and

     per share data)      Three Months  Three Months  Nine Months  Nine Months
                            Ended          Ended         Ended        Ended
                         November 1,    November 3,   November 1,  November 3,
                            2008           2007          2008         2007

    Net sales
         Stores           $250,870       $233,588     $722,259     $654,182
         Direct            101,812         90,315      285,958      251,424
                           352,682        323,903    1,008,217      905,606
    Other                   10,398          8,841       31,716       29,181
    Total Revenues         363,080        332,744    1,039,933      934,787

Costs of goods sold,

buying and occupancy

     costs                 212,212        180,909      591,447      511,224
    Gross Profit           150,868        151,835      448,486      423,563
       As a percent of
        revenues              41.6%          45.6%        43.1%        45.3%

    Selling, general
     administrative
     expenses              118,321        104,150      331,360      294,385
       As a percent of
        revenues              32.6%          31.3%        31.9%        31.5%
    Operating income        32,547         47,685      117,126      129,178
       As a percent of
        revenues               9.0%          14.3%        11.3%        13.8%

Interest expense, net 570 3,077 4,370 9,377

Income before income

     taxes                  31,977         44,608      112,756      119,801

Provision for income

     taxes                  12,936         17,771       45,091       47,683

    Net income             $19,041        $26,837      $67,665      $72,118

    Income per share:
         Basic               $0.31          $0.44        $1.10        $1.20
         Diluted             $0.30          $0.42        $1.06        $1.13

Weighted average shares

     outstanding:
         Basic              61,878         60,725       61,588       60,257
         Diluted            64,078         64,195       64,127       63,923



                                                                Exhibit (2)
    J. Crew Group, Inc.

Condensed Consolidated Balance Sheets

    (Unaudited)

    (In thousands)                November 1,     February 2,   November 3,
                                     2008            2008         2007

    Assets
    Current assets:
       Cash and cash
        equivalents                $114,456        $131,510     $63,760
       Inventories                  250,140         158,525     210,774
       Prepaid expenses and
        other current assets         36,240          33,293      42,121
       Prepaid income taxes           6,918           1,194           -
       Refundable income taxes            -           8,600       8,600
    Total current assets            407,754         333,122     325,255

    Property and equipment,
     net                            198,032         168,292     156,524

    Other assets                     31,302          34,182      29,941
    Total assets                   $637,088        $535,596    $511,720


Liabilities and Stockholders'

     equity
    Current liabilities:
       Accounts payable            $134,576        $101,277    $106,811
       Other current
        liabilities                  84,415          93,796      80,310
       Income taxes payable               -               -      13,401
    Total current
     liabilities                    218,991         195,073     200,522

    Long-term debt                  100,000         125,000     125,000

    Deferred credits                 74,378          67,600      69,140

    Other liabilities                 7,654           7,601       6,689

    Stockholders' equity            236,065         140,322     110,369
    Total liabilities and
     stockholders' equity          $637,088        $535,596    $511,720


Exhibit (3)

Actual and Projected Store Count and Square Footage


    Fiscal 2008

    Quarter       Total stores  Number of      Number of stores  Total stores
                  open at       stores opened  closed during     open at end
                  beginning     during         the quarter       of the
                  of the        the quarter                      quarter
                  quarter
    1st Quarter
     (Actual)       260               7                0             267
    2nd Quarter
     (Actual)       267               9                0             276
    3rd Quarter
     (Actual)       276              15                1             290
    4th Quarter
     (Projected)    290              11                1             300


    Fiscal 2008

    Quarter       Total gross  Gross square feet  Reduction of   Total gross
                  square feet  for stores opened  gross square   square feet
                  at beginning or expanded        feet for       at end of
                  of the       during the         stores closed  the quarter
                  quarter      quarter            or downsized
                                                  during the
                                                  quarter

    1st Quarter
     (Actual)     1,688,016         38,685           (2,261)       1,724,440
    2nd Quarter
     (Actual)     1,724,440         41,949           (7,899)       1,758,490
    3rd Quarter
     (Actual)     1,758,490         67,657          (10,304)       1,815,843
    4th Quarter
     (Projected)  1,815,843         54,547           (6,181)       1,864,209

SOURCE J. Crew Group, Inc.

CONTACT: James S. Scully, Chief Administrative Officer and Chief
Financial Officer of J. Crew Group, Inc., +1-212-209-8040, or Investors,
Allison Malkin, Chad Jacobs, or Joe Teklits, all of Integrated Corporate
Relations, +1-203-682-8200, for J. Crew Group, Inc.
Web Site: http://www.jcrew.com
(JCG)

Certain statements herein are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the Company's current expectations or beliefs concerning future events and actual results of operations may differ materially from historical results or current expectations. Any such forward-looking statements are subject to various risks and uncertainties, including the strength of the economy, changes in the overall level of consumer spending or preferences in apparel, the performance of the Company's products within the prevailing retail environment, trade restrictions, political or financial instability in countries where the Company's goods are manufactured, postal rate increases, paper and printing costs, availability of suitable store locations at appropriate terms and other factors which are set forth in the Company's Form 10-K and in all filings with the SEC made by the Company subsequent to the filing of the Form 10-K. The Company does not undertake to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.